What does the AG's Settlement With the Big Banks Mean for You?

The U.S. government reached the $25 billion settlement with Bank of America, Citigroup, JPMorgan Chase, Ally and Wells Fargo over improper foreclosures on homeowners without proper documentation. It may seem that $25 billion is a lot of money, but in the grand scheme of things, what does that actually mean for homeowners that have lost their homes to foreclosure or for those who owe much more than their homes are worth.

Some of the money is going to be used to encourage more loan modifications and to write down principal in some cases. I don't think homeowners should get too excited about the idea of writing down the principal on their mortgage - at least not here in New Jersey. The write downs will likely be fairly modest and rare. For those eligible homeowners already kicked-out of their homes due to foreclosure, they will be awarded about $2,000 in compensation. That is hardly enough for one month's rent in Hackensack where I practice.

And let's not forget that this settlement involves only five of the biggest lenders. There is sure to be more litigation stemming from the systemic problems in the foreclosure process. The settlement does not involve Fannie Mae, Freddie Mac, or the many other lenders that participated in the disorderliness of the foreclosure process over the last several years.